AVIAS CORPORATE SERVICES P.LTD, MUMBAI V. ITO 3(1)(1), MUMBAI

ITA 1103/MUM/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0310 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Salary income
• Section: 142(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.1103/MUM/2012 (ASSESSMENT YEAR 2007-08) M/S AVIAS CORPORATE SERVICES P LTD, 15-17, CANARA BANK BLDG, ADI MARZBAN MAR, BALLARD ESTATE, MUMBAI-38 PAN : AAECA8577F VS ITO, WARD 3(1)(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY NONE RESPONDENT BY SHRI RAJESH KUMAR DATE OF HEARING 26-07-2017 DATE OF PRONOUNCEMENT 04-08-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-5, MUMBAI DATED 11-11-2011 AND IT PERTAINS TO ASSESSME NT YEAR 2007-08. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY ENGAGED IN THE BUSINESS OF FINANCE AND ARRANGING LOANS FOR PARTIES , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 15-11-2007 DECLARING TOTAL INCOME AT RS.4,60,295. THE CASE HAS BEEN SELECTED FOR SCRUTI NY AND NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTI CES, AUTHORIZED 2 REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FILED DETAILS, AS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO NOTICED THAT THE ASSESSEE HAS EARNED GROSS BROKERAGE OF RS.1,41, 46,389 AND CLAIMED TO HAVE INCURRED BROKERAGE PAID TO SUB BROKERS OF RS.39,08, 131. THEREFORE, THE ASSESSEE WAS ASKED TO FURNISH NAMES AND ADDRESSES O F THE PARTIES TO WHOM BROKERAGE WAS PAID, JUSTIFICATION FOR GIVING BROKER AGE AND DETAILS OF SERVICES RENDERED BY THE PARTIES. AFTER CONSIDERING THE DET AILS FILED BY THE ASSESSEE, THE AO OBSERVED THAT THE ASSESSEE HAS PAID BROKERAGE TO VARIOUS PERSONS INCLUDING HIS RELATIVES, HOWEVER, FAILED TO JUSTIFY PAYMENT O F BROKERAGE WITH CORRESPONDING SERVICES RENDERED BY SUCH PERSONS AND HENCE DISALLOWED BROKERAGE CHARGES PAID AMOUNTING TO RS. 39,08,131. SIMILARLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED T HAT THE ASSESSEE HAS DEBITED A SUM OF RS.34,24,000 ON ACCOUNT OF CAR HIR E CHARGES. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS PAID CAR HIRE CHARGE S TO THREE PERSONS, VIZ. MS. SHALINI AMARNANI, MS. HEENA VED, AND RADHIKA SHIVAS UBRAMANIUM AND ALL THESE PERSONS ARE FAMILY MEMBERS OF THREE DIRECTORS OF TH E COMPANY. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS PAID EXCESSIVE AND U NREASONABLE CAR HIRE CHARGES TO THE SAID PARTIES RANGING FROM RS.85,000 TO RS.1,15,000 PER MONTH FOR VEHICLES LIKE HONDA ACCORD AND HONDA CITY WHEREAS T HE PREVAILING MARKET RATE FOR SUCH VEHICLES IS MUCH LESS THAN WHAT IS CLAIMED BY THE ASSESSEE AND 3 ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 40A(2 )(B) AND DISALLOWED EXCESSIVE AND UNREASONABLE AMOUNT OVER AND ABOVE TH E PREVAILING MARKET RATE. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREFERR ED APPEAL BEFORE CIT(A). BEFORE THE CIT(A), THE ASSESSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE AO. THE CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE AND ALSO RELYING UPON THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2006-07 IN ITA NO.2251/MUM/2010 ORDER DATED 23-12-2010 CONFIRMED T HE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF BROKERAGE CHARGES PA ID AND CAR HIRE CHARGES. THE RELEVANT PORTION OF THE ORDER OF CIT(A) IS REPR ODUCED BELOW:- 3.3. I HAVE CONSIDERED THE SUBMISSION OF THE A.O. A ND HAVE PERUSED THE ASSESSMENT ORDER. THE A.O. HAS MADE AD DITION AFTER GIVING THE DETAILED REASON FOR THE SAME. THE A.O. HAS ALSO RELIED ON ORDER FOR THE A.Y. 2006-07 IN THE AS SESSEE'S OWN CASE. IN THIS YEAR ALSO THE ISSUES WERE SAME I.E. DISALLOWANCE OF BROKERAGE AND CAR HIRE CHARGES. THE APPELLANT COMPANY PREFERRED APPEAL BEFORE THE HON. ITAT A-BENCH. MUMBAL AGAINST THE ADDITIONS WHICH WERE CONFIRMED BY THE LEARNED CIT(A). THE HON. ITAT A-BENCH, MUMBAL HAS CONFIRMED THE ADDITIONS MADE BY THE A.O. FOR THE A.Y. 2006-07 IN ITA NO. 2251/M/2010 ORDER DT. 23.12.2010. RELEVANT PARA S ARE REPRODUCED AS UNDER: 'THE FIRST DISPUTE IS REGARD/RIG DISALLOWANCE OF BR OKERAGE OF RS.24, 97,485/- THE ASSESSEE WAS IN THE BUSINESS OF PROVIDING FINANCE TO CLIENTS AND HAD RECEIVED BROKE RAGE INCOME OF RS. 1.33 CRORES. THE AO NOTED THAT THE ASSESSEE HAD DEBITED A SUM OF RS.24,97,4851- ON ACCOUNT OF BROKERAGE PAID TO VARIOUS PARTIES. THE DETAILS OF BROKERAGE PAID TO THE 15 PARTIES WERE AS UNDER: 4 1) PREMJI DEVSHI SATRA 2) RAMNIK DEVSHI 3) NEMCHAND GINDRA 4) VIRAL V. SAVLA 5) GIRISH VALLABHJI SAVLA 6) VALFABHJI DEVJI SAVLA, (HUF) 7) KIRAN THOLE 8) PARESH THOLE 9) G.B.KALA 10) GOKARITA IMPEX PVT. LTD. 11) SARIGEETA AMARNANI 12) DEVIDAS AMARNANI 13) HEMCHAND VELGI 14) M/S.SWAN FINANCE LTD. 15) DINANATH SHAH RS.1,00,000/- RS.1,00,000/- RS.1,00,000/- RS.1,50,000/- RS.1,30,000/- RS.1,60,000/- RS.1,00,000/- RS.1,00,000/- RS.75,000/- RS.1,35,000/- RS.2,10,000/- RS.2,45,000/- RS.5,02,512/- RS.1,75,000/- RS.4,49,419/- RS.1,44,222/- WITH A VIEW TO FINDING OUT THE GENUINENESS OF SUB- BROKERAGE PAYMENTS, THE AO OBTAINED THE ADDRESS OF THE PARTIES AND ISSUED NOTICES UNDER SECTION 133(6). TH E AO NOTED THAT THE PARTIES MENTIONED AT SR. NOS. 1, 2 W ERE NOT FOUND AT THE ADDRESS GIVEN. LATER SHRI PREMJI SATRA WAS PRODUCED BY THE ASSESSEE AND HE ADMITTED HAVING RECEIVED COMMISSION BUT COULD NOT LINK THE COMMISSI ON TO ANY PARTY INTRODUCED BY HIM. THE AO ALSO FOUND THAT PARTIES AT SR. NOS.4, 5 & 6 WERE ENGAGED IN THE BUSINESS OF PROVISIONAL STORE OR DERIVED SALARY INCOME. THEY HAD NO EXPERIE NCE IN THE BUSINESS OF FINANCE. THE ASSESSEE EXPLAINED THAT SH RI GIRISH SAVLA AND VALLABHJI DEVJI SAVLA (HUF) HAD STATED THAT THE Y HAVE INVOLVED IN FINANCE MADE AVAILABLE TO M/S. USHDEV I NTERNATIONAL LTD TO THE EXTENT OF RS. 10 CRORES. HOWEVER, USHDEV INTERNATIONAL LATER VIDE LETTER DATED 12-12-08 INFORMED THE AO TH AT THERE WERE NOT INTRODUCERS IN RESPECT OF SAID TRANS ACTIONS. SHRI GIRISH SAVLA HAD ALSO STATED THAT HE HAD INTRO DUCED YES BANK MANAGER TO THE ASSESSEE AS HE WAS BUYING KIRAN A GOODS FROM HIS SHOP. HOWEVER HE COULD NOT GIVE THE NAME OF THE MANAGER NOR HIS ADDRESS. THE AO THEREFORE CONCL UDED THAT THERE WAS NO EVIDENCES FOR ANY SERVICES RENDER ED BY 5 THESE PARTIES. THE AO ALSO FOUND THAT THE PARTIES MENTIONED AT SR. NO.7 TO 10 WERE HAVING THE SAME AD DRESS AND WERE NOT HAVING ANY EXPERIENCE IN THE LINE OF F INANCE BUSINESS AND THERE WAS NO EVIDENCE PRODUCED REGARDI NG RENDERING OF SERVICES BY THESE PARTIES. AO THEREFOR E OBSERVED THAT MERE MAKING PAYMENT BY CHEQUE WAS NOT ENOUGH WHEN THERE WAS NO EVIDENCE OF SERVICES RENDE RED. THE PARTIES AT SR. NOS.11 & 12 WERE FOUND TO BE FAM ILY MEMBERS OF THE DIRECTORS. THEY COULD NOT PRODUCE AN Y EVIDENCE REGARDING ANY PARTY INTRODUCED BY THEM FOR THE PAYMENT OF COMMISSION. THERE WAS NO EVIDENCE OF ANY SERVICES RENDERED BY THEM. THEY HAD RECEIVED COMMIS SION MAINLY FROM THE ASSESSEE AND THEIR INCOME HAD SUBSTANTIALLY INCREASED SINCE START OF THE BUSINESS OF THE ASSESSEE. IN REGARD TO PARTIES AT SR. NOS. 14 & 15 THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE REGARDING S ERVICES RENDERED BY THEM. TWO OTHER PARTIES I.E. M/S.SURYA PHARMACEUTICALS LTD. AND N/S. PETRON CIVIL ENGINEER ING (P) LTD. HAD ALSO DENIED ANY ROLE OF THIRD PARTY. CONSI DERING THE FACTS AND CIRCUMSTANCES MENTIONED ABOVE, AO CONCLUD ED THAT THE PAYMENT OF SUB-BROKERAGE WAS NOT GENUINE AND THEREFORE HE DISALLOWED THE SAME AND MADE ADDITION OF RS.24,97,485/-. THE ASSESSEE DISPUTED THE DECISION OF THE AO AND S UBMITTED BEFORE CIT(A) THAT FOR INTRODUCING PARTIES THE BROK ER IS NOT SUPPOSED TO BE AN EXPERT IN THE FIELD. IT WAS REITE RATED THAT THE COMMISSION HAD BEEN PAID FOR INTRODUCING PARTIE S FOR BUSINESS AND THE PAYMENT HAD BEEN MADE BY CHEQUE AN D THEREFORE THE CLAIM SHOULD BE ALLOWED. IT WAS ALSO SUBMITTED THAT REPLY FROM THE THREE PARTIES I.E. M/S. USHDEV INTERNATIONAL, M/S.SURYA PHARMACEUTICALS LTD. AND M/S.PETRON CIVIL ENGINEERING PVT. LTD. WHO DENIED THAT THERE WAS ANY INTRODUCER IN THE BORROWINGS MADE BY THEM THOUGH TH E ASSESSEE HAD NOT BEEN CONFRONTED WITH THE ASSESSEE. IT WAS ALSO SUBMITTED THAT M/S. SWAN FINANCE LTD WAS A PUBLIC L IMITED COMPANY DEALING IN FINANCE AND THEREFORE PAYMENT TO THE SAID PARTY COULD NOT BE DISALLOWED. GTA) WAS HOWEVER NOT SATISFIED BY THE CONTENTIONS RAISED BY THE ASSESSEE. IT WAS O BSERVED BY HIM THAT THE SERVICES RENDERED HAD NOT BEEN ESTABLI SHED BY THE 6 ASSESSEE. SUBSTANTIAL BROKERAGE HAD ALSO BEEN PAID TO THE FAMILY MEMBERS OF THE DIRECTORS. HE WAS THUS NOT SA TISFIED ABOUT GENUINENESS OF BROKERAGE PAYMENT. HOWEVER CIT (A) OBSERVED THAT THE ASSESSEE HAD EARNED SUBSTANTIAL I NCOME BY WAY OF BROKERAGE AND THEREFORE IT WAS POSSIBLE THAT IT MAY HAVE UTILIZED SERVICES OF SOME SUB- BROKERS. HE THEREFOR E ALLOWED 20 0 10 OF BROKERAGE CLAIMED AMOUNTING TO RS.4,99,4971- AND THE BALANCE ADDITION WAS CONFIRMED. AGGRIEVED BY THE SA ID DECISION THE ASSESSEE IS IN APPEAL. BEFORE US THE LEARNED AR FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT BROKERAGE HAD BEEN PAID FOR INTRODUCING PARTIES AND FOR SUCH SERVICES NO EXPERIENCE/EXPERTISE WAS REQUIRED. IT WAS ALSO SUBM ITTED THAT THE PAYMENT HAD BEEN MADE BY ACCOUNT PAYEE CHE QUE AND THE TAX HAD ALSO BEEN DEDUCTED AT SOURCE. IT WA S POINTED OUT THAT DENIAL BY THE THREE PARTIES FOR NOT RENDER ING SERVICES. HAD NOT BEEN CONFRONTED TO THE ASSESSEE. IT WAS ALSO ARGUED THAT BROKERAGE INCOME HAD INCREASED THI S YEAR BY 34% COMPARED TO THE EARLIER YEAR AND THE SUB-BRO KERAGE PAID WAS ONLY 18% OF THE BROKERAGE INCOME COMPARED TO 22 .7% IN THE IMMEDIATE PRECEDING YEAR. HOWEVER THE LEARNED AR) A DMITTED THAT IN EARLIER YEAR THERE WAS NO SCRUTINY AND RET URNS WERE COVERED UNDER SUMMARY SCHEME. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF CIT(A). IT WAS EMPHASIZED THAT THERE WAS NO EVID ENCES FOR SERVICES RENDERED AND BURDEN FOR WHICH WAS ON T HE ASSESSEE WHICH WAS NOT DISCHARGED. THE THREE PARTIES HAD SP ECIFICALLY DENIED AND TWO PARTIES WERE RELATED TO THE ASSESSEE . HE PLACED RELIANCE ON THE FINDINGS GIVEN IN THE ORDERS OF AUT HORITIES BELOW. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVA L CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DIS ALLOWANCE OF SUB-BROKERAGE PAID BY THE ASSESSEE. THE ASSESSEE WA S IN THE BUSINESS OF PROVIDING FINANCE TO OTHER PARTIES AND HAD EARNED COMMISSION OF RS. 1.33 CRORES. THE ASSESSEE HAD ALS O CLAIMED DEDUCTION ON ACCOUNT OF SUB-BROKERAGE OF RS.24,97,485/- CLAIMED TO HAVE BEEN PAID TO 15 PART IES FOR OBTAINING ORDERS. THE AO HAD MADE DETAILED EXAMINAT ION IN RESPECT OF ALL THE 15 PARTIES REGARDING SERVICES RE NDERED FOR PAYMENT OF SUB-BROKERAGE. THE ASSESSEE COULD NOT PR ODUCE ANY 7 EVIDENCE REGARDING SERVICES WERE CLAIMED TO HAVE BE EN RENDERED BY THE PARTIES. AO ALSO FOUND THAT THREE PARTIES TO WHOM SERVICES RENDERED DENIED INVOLVEMENT OF ANY SUB-BRO KER. IT WAS ALSO FOUND THAT TWO PARTIES TO WHOM SUBSTANTIAL BROKERAGE HAD BEEN PAID WERE RELATIVES OF THE DIRECTORS AND T HERE WAS NO EVIDENCE OF SERVICES HAVING BEEN RENDERED. IT IS A SETTLED LEGAL POSITION THAT IN CASE OF ANY. CLAIM ON ACCOUN T OF PAYMENT OF BROKERAGE/COMMISSION BURDEN IS ON THE AS SESSEE TO ESTABLISH THAT SERVICES WERE ACTUALLY RENDERED. MER E EXISTENCE OF AGREEMENTS OR PAYMENT BY CHEQUE IS NOT ENOUGH. THIS VIEW IS SUPPORTED BY THE JUDGMENTS OF HON'BLE SUPRE ME COURT IN CASE OF LAXMIRATHAN COTTON MILLS CO. VS CI T (73 ITR 634) AND BY THE JUDGMENT OF HON'BLE SUPREME COURT I N CASE OF LAXMINARAYAN MADAN (86 ITR 439). THE LEARNED AR FOR THE ASSESSEE HAS ARGUED THAT STA TEMENT OF THREE PARTIES WHO HAD DENIED INVOLVEMENT OF ANY SUB -BROKER HAD NOT BEEN CONFRONTED TO THE ASSESSEE. HOWEVER WE FIN D THAT DISALLOWANCE HAD NOT BEEN MADE ONLY ON THE GROUND O F DENIAL. DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT NO EVIDENCE HAD BEEN PRODUCED BY TH E ASSESSEE REGARDING RENDERING OF SERVICES. AS REGARDS TWO PAR TIES WHICH WERE RELATED TO THE DIRECTORS THE ASSESSEE HAS SUBMITTED THAT THE PROVISIONS OF SECTION WERE NOT APPLIED. THE SUBMISS ION IS DEVOID OF ANY MERIT. PROVISIONS OF SECTION 40A(2)(B) CAN HE APPLIED WHEN THE PAYMENT IS FOUND TO THE EXCESSIVE COMPARED TO SERVI CES RENDERED. IN THIS CASE THERE IS NO EVIDENCE OF ANY SERVICES RENDERED AND THEREFORE ENTIRE CLAIM CAN BE DISALLOW ED. IT HAS ALSO BEEN ARGUED THAT INCOME FROM BROKERAGE THIS YEAR HAS INCREASED AND THAT BROKERAGE PAYMENT THIS YEAR IS LOWER COMPARED TO THE EARLIER YEAR IN WHICH THERE WAS NO DISALLOWANCE. THIS ARGUMENT CAN ALSO NOT BEE N ACCEPTED AS THERE IS NO EVIDENCE TO LINK THE INCREA SE IN BROKERAGE INCOME TO ANY SERVICES RENDERED BY SUB- BROKERS. FURTHER, MERELY BECAUSE THERE WAS NO DISALLOWANCE IN THE EARLIER YEAR, CANNOT BE GROUND FOR NO DISALLOWANCE THIS YEAR AS IN THE EARLIER YEAR CLAIM WAS ALLOWED WITHOUT ANY EXAMINATION AS THE ASSESSMENT W AS 8 COVERED UNDER SUMMARY SCHEME. THUS ON THE FACTS OF THE CASE AND CONSIDERING THE MATERIAL ON RECORD THE ENTIRE CLAIM OF COMMISSION COULD BE DISALLOWED. HOW EVER CIT(A) HAS TAKEN A LIBERAL VIEW AND CONSIDERING THA T THE ASSESSEE WAS IN THE BUSINESS OF FINANCE HE HAD COME TO THE CONCLUSION THAT IT WAS POSSIBLE THAT SOME BROKERAGE EXPENDITURE MAY HAVE BEEN INCURRED. HE HA S THEREFORE ALLOWED THE CLAIM TO THE EXTENT OF 20%. T HE REVENUE IS NOT IN APPEAL. THE ORDER OF CIT(A) ON TH E FACTS OF THE CASE IS FOUND REASONABLE AND THE SAME IS UPHELD. THE SECOND DISPUTE IS REGARDING ADDITION OF RS.22,44,000/- ON ACCOUNT OF DISALLOWANCE OUT OF MO TE CAR HIRE CHARGES. THE AO NOTED THAT THE ASSESSEE HA D DEBITED A SUM OF RS. 34,20,000/- ON ACCOUNT OF CAR HIRE CHARGES. THE AO ALSO NOTED THAT THE CAR HIRE CHARGE S HAD BEEN PAID TO MISS SHALINI AMARNANI, MISS HEENA VED AND MRS. RADHIKA SHIVASUBRAMANIAM WHO WERE ALL FAMILY MEMBERS OF THE THREE DIRECTORS OF THE COMPAN Y. THE HIRE CHARGES HAD BEEN PAID FOR HIRE OF HONDA ACCORD AND HONDA CITY CAR AS PER DETAILS GIVEN BELOW:- 1. MS. SHALINI AMARNANI - HONDA ACCORD - RS. 1, 15, 00 0/- PER MONTH 2. MS. HEENA VED - HONDA CITY RS. 85,000/- PER MONTH 3. RADHIKA SHIVASUBRAMANIARN - RS. 85,000/- PER MO NTH THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE CAR HIRE CHARGES SHOULD NOT BE CONSIDERED AS EXCESSIVE COMPA RED TO MARKET VALUE. THE ASSESSEE EXPLAINED THAT THE CARS WERE HIRED FROM HIGH VALUE SEGMENT TO SAVE EXPENDITURE ON SALA RY, OVER TIME ALLOWANCE, PROVIDENT FUND AND THE COST OF SUPE RVISION AND MAINTENANCE OF CARS. THE ASSESSEE ALSO SUBMITTED A QUOTATION OF CAR HIRE CHARGES FROM WOF DATED 18.12.2008 IN WH ICH COST OF HIRE CHARGES FOR HONDA CITY AT RS.80,000/- PER MONT H (12 HOURS A DAY FOR 6 DAYS WEEK) FOR 2400 KM A MONTH WITHOUT FU EL). AO HOWEVER WAS NOT SATISFIED BY THE EXPLANATION GIVEN. IT WAS OBSERVED BY HIM THAT INCOME-TAX 9 DEPARTMENT IN THE YEAR 2008 WAS HIRING TAVERA / SCO RPIO FOR RS.28,000/- PER MONTH WHEREAS THE ASSESSEE IN T HE YEAR 2005-06 WAS PAYING MUCH MORE HIRE CHARGES WHEN THE FUEL COST WAS LOWER. IT WAS ALSO OBSERVED BY HIM TH AT THE QUOTATION SUBMITTED FROM WOF DID NOT CONTAIN ADDRES S OF THE COMPANY OR ADDRESS OF THE PARTY AND THE QUOTATI ON WAS NOT SIGNED. HE FOUND THE HIRE CHARGES OF RS.80,000 PER MONTH WITHOUT FUEL AS ABSURD AS AT THAT RATE COST O F HIRE PER YEAR CAME TO RS.9,60,000/- WHICH EXCEEDED THE C OST OF HONDA CITY CAR, IT IS ALSO NOTED BY HIM THAT THE AS SESSEE HAD NOT SUBMITTED ANY LOG BOOK. HE THEREFORE REJECT ED THE HIRE CHARGES SHOWN BY THE ASSESSEE AND ESTIMATED TH E HIRE CHARGES AT RS. 30,000/- PER MONTH IN CASE OF HONDA CITY AND RS. 38,000/- PER MONTH IN THE CASE OF HONDA ACCORD AND THE EXCESS OF RS.22,44,000/- WAS DISALLOWED UNDER SECTI ON 40A(2)(B). IN APPEAL THE ASSESSEE SUBMITTED THAT TH E INCOME-TAX DEPARTMENT HIRE TAVERA / SCORPIO AT RS.28,000/- PER MONTH AND THAT TOO FOR 8 HOURS PER DAY WHEREAS IN CASE OF THE ASSESSEE THE VEHICLES WERE U SED FOR 12 HOURS AND THE SAME WERE TO BE MAINTAINED IN SPIC AND SPAN CONDITIONS FOR ESCORTING TOP OFFICIALS OF HANK S/ FINANCIAL INSTITUTIONS TO THE FACTORY OF CUSTOMERS MANY OF WHOM ARE REPUTED LIMITED COMPANIES. THE CLAIM WAS THEREFORE REASONABLE AND SHOULD BE ALLOWED. CIT(A) HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED. IT W AS OBSERVED BY HIM THAT INCOME-TAX DEPARTMENT WAS REGULARLY HIRING MARUTI SX4 SEDAN CARS FOR USE BY DEPARTMENTAL OFFICERS ( 29,900/- PER MONTH FOR 11 H OURS PER DAY AND FOR 6 DAYS IN A WEEK. THE SAID CARS WER E QUITE CLOSE OF HONDA CITY CAR IN RATES AND PERFORMANCE. THEREFO RE THE HONDA CITY CARS COULD BE PROCURED @ 34,000/- PER MO NTH FOR 11 HOURS PER DAY. CONSIDERING THE FACTS THAT TH E ASSESSEE WAS UTILIZING THE VEHICLE FOR LONGER HOURS FOR 7 DAYS PER WEEK CIT(A) HELD THAT HIRE CHARGES FOR HONDA CI TY WOULD BE RS. 42,500/- PER MONTH AND FOR HONDA ACCOR D RS.57,500/- PER MONTH . HE THEREFORE HELD THAT CAR HIRE EXPENSES AMOUNTING TO RS.17,10,000/- WERE EXCESSIVE UNDER SECTION 40A(2)(B). HE THUS RESTRICTED THE DISALLOWA NCE TO RS.17,10,000/-. AGGRIEVED BY THE SAID DECISION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 10 BEFORE US THE LEARNED AR FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES THAT THE EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS AND WAS COMPARABLE TO MARKE T RATE. IT WAS ACCORDINGLY URGED THAT THE CLAIM SHOUL D BE ALLOWED. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF CIT(A). IT WAS POINTED OUT THAT ADMITTEDLY THERE WAS NO AGREEMENT FOR HIRE AND HIRE CHARGES HAD BEEN PAID TO CLOSE RELATIVES HIT BY SECTION 40A(2)(B). THE ASSESSEE WAS ALSO NOT MAINTAINING LOG BOOK. THE BUR DEN WAS ON THE ASSESSEE TO ESTABLISH THAT THE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 3.4 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING DIS ALLOWANCE OUT OF CAR HIRE CHARGES. THE ASSESSEE HAD INCURRED SUBS TANTIAL EXPENDITURE ON ACCOUNT OF CARS TAKEN ON HIRE FROM R ELATIVES OF THE DIRECTORS. HONDA CAR HAD BEEN HIRED CO) RS.1,15 ,000/- PER MONTH AND HONDA CITY AT RS.85,0001- PER MONTH. THE AO FOUND THE CLAIM TO BE EXCESSIVE. HE ALLOWED HIRE CHARGES @ RS.30,000/- PER MONTH IN CASE OF HONDA CITY CAR AND RS.38,000/- PER MONTH IN CASE OF HONDA ACCORD. IN APPEAL CIT(A) NOTED THA T INCOME-TAX DEPARTMENT WAS HIRING MARUTI SX4 SEDAN CARS AT RS.2 9,900/- PER MONTH FOR 11 HOURS PER DAY AND FOR SIX DAYS IN A WE EK WITHOUT FUEL. SINCE HONDA CITY WAS SLIGHTLY SUPERIOR MODEL, HE ESTIMATED RS.34,000/- PER MONTH FOR SIMILAR SERVICE AS IN CAS E OF THE DEPARTMENT. HE FURTHER NOTED THAT SINCE THE ASSESSE E WAS USING THE VEHICLES FOR LONGER HOURS FOR SEVEN DAYS PER WE EK HE ESTIMATED THE RATE FOR HONDA CITY AT RS.42,500/- PE R MONTH AND IN CASE OF HONDA ACCORD RS.57,500 PER MONTH. TH E BALANCE PAYMENTS WERE FOUND EXCESSIVE COMPARED TO MARKET VALUE RESULTING INTO DISALLOWANCE OF PS. 17, 10,000/-. ON CAREFUL CONSIDERATION OF THE VARIOUS A SPECTS WE FIND THE ORDER OF CJT(A) TO BE REASONABLE. THE H IRE CHARGES PAID BY THE ASSESSEE TO THE RELATIVES OF TH E DIRECTORS ARE APPARENTLY FOUND EXCESSIVE. THE ANNUAL HIRE CHARGES EVEN EXCEED THE COST OF THE CAR. THOUGH THE ASSESSEE HAS CLAIMED TO HAVE FILED A QUOTATION FROM WOE DATED 18.12.2008 IN WHICH COST OF HIRING HONDA CITY CAR W AS SHOWN AT RS.80,000/- PER MONTH BUT THE SAME AS PER THE 11 FINDING OF THE AO WAS NOT SIGNED. EVEN IF THE QUOTA TION IS SIGNED IT WAS ONLY A QUOTATION AND NOT ANY ACTUAL I NSTANCES OF HIRE OF CAR BY A THIRD PARTY AT THAT RATE. THERE FORE THE SAID QUOTATION WILL BE OF NO HELP TO THE ASSESSEE. WE TH EREFORE FIND THE ORDER OF C1T(A) QUITE REASONABLE AND THE DISALLOWANCE MADE BY HIM IS UPHELD.' 3,3.II. SINCE THE FACTS AND ISSUES ARE IDENTICAL, R ESPECTFULLY FOLLOWING THE HONBLE ITAT DECISION, ADDITION MADE B Y THE A.O. ON BOTH THE ACCOUNTS ARE CONFIRMED. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS I N APPEAL BEFORE US. 5. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD THE LD.DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE TIME OF H EARING, THE LD.DR SUBMITTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY T HE DECISION OF ITAT, MUMBAI BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEA R 2006-07 IN ITA NO.2251/MUM/2010 ORDER DATED 23-12-2010. WE FIND T HAT SIMILAR ISSUE HAS ARISEN FOR CONSIDERATION BEFORE THE CO-ORDINATE BEN CH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 WHEREIN THE CO-ORDINATE BENCH, AFTER CONSIDERING THE FACTS OF THE CASE UPHE LD ADDITIONS MADE BY THE AO. THE CIT(A), BY FOLLOWING THE DECISION OF ITAT HAS U PHELD ADDITIONS MADE BY THE AO. FACTS REMAIN UNCHANGED. THE ASSESSEE DID NOT APPEAR TO PROVE THE FINDINGS OF FACT RECORDED BY THE LD.CIT(A) IS INCOR RECT. HENCE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE ASSESSEE. 12 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH AUGUST, 2017. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 04 TH AUGUST, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI